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CHAPTER 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment

ANSWERS TO REVIEW QUESTIONS
1-1 The explosion in e-commerce will affect managerial accounting in significant ways. One effect will be a drastic reduction in paper work. Millions of transactions between businesses will be conducted electronically with no hard-copy documentation. Along with this method of communicating for business transactions comes the very significant issue of information security. Businesses need to find ways to protect confidential information in their own computers, while at the same time sharing the information necessary to complete transactions. Another effect of e-commerce is the dramatically increased speed with which business transactions can be conducted. In addition to these business-to-business transactional issues, there will dramatic changes in the way managerial accounting procedures are carried out, one example being e-budgeting, which is the enterprise-wide and electronic completion of a company’s budgeting process. 1.2 Plausible goals for the organizations listed are as follows: and maintain sales of books,

(a) Amazon.com: (1) To achieve profitability, and (2) to grow on-line music, and other goods.

(b) American Red Cross: (1) To raise funds from the general public sufficient to have resources available to meet any disaster that may occur, and (2) to provide assistance to people who are victims of a disaster anywhere in the country on short notice. (c) General Motors: (1) To earn income sufficient to provide a good return on the investment of the
McGraw-Hill/Irwin Inc. Managerial Accounting, 5/e

company's stockholders, and (2) to provide the highestquality product possible. (d) J. C. Penney: (1) To penetrate the retail market in virtually every location in the United States, and (2) to grow over time in terms of number of retail locations, total assets, and earnings. (e) City of Pittsburgh: (1) To maintain an urban environment as free of pollution as possible, and (2) to provide public safety, police, and fire protection to the city's citizens. (f)Hertz: (1) To be a recognizable household name associated with rental car services, and (2) to provide reliable and economical transportation services to the company's customers. 1-3 The four basic management activities are listed and defined as follows: (a) Decision making: alternatives. Choosing among the available and

(c) Directing operations: Running the organization on a day-to-day basis. (d) Controlling: Ensuring that the organization operates in the intended manner and achieves its goals. 1-4 Examples of the four primary management activities in the context of a national fast-food chain, such as McDonald's or Pizza Hut, are as follows: (a) Decision making: Choosing among several possible locations for a new fast-food outlet. (b) Planning: Developing a cost budget for the food and paper products to be used during the next quarter in a particular fast-food restaurant.